Philippine CPI hits near 4-yr high, raises odds of bigger hike in August

An aerial view shows the Ortigas business district in Pasig City, Philippines, June 10, 2022. Picture taken with a drone. REUTERS/Adrian Portugal

By Neil Jerome Morales and Enrico Dela Cruz

MANILA (Reuters) -Philippine inflation accelerated to its fastest pace in nearly four years in July, raising the odds of a bigger interest rate hike at the central bank’s next policy meeting on Aug. 18.

The consumer price index (CPI) rose 6.4% in July from a year earlier, driven by higher transport and food prices, the Philippine Statistics Authority said on Friday.

Last month’s inflation print, which was at the top end of the central bank’s 5.6% to 6.4% projection, raised the probability of a 50 basis points hike this month, Bangko Sentral ng Pilipinas Governor Felipe Medalla said.

He reiterated the central bank was ready to act to bring inflation, which averaged 4.7% in January to July, back down to the 2% to 4% target set by the government for this year and next.

“The BSP stands ready to employ all the necessary policy actions to bring inflation toward a target-consistent path over the medium term,” Medalla told a business forum.

The was a chance for inflation to return within the target range next year after likely settling at an average of 5% this year, he said.

The BSP’s cumulative 125 basis points hike this year, including last month’s off-cycle 75 bps hike, worked in stabilising the peso against the dollar, therefore minimising the impact of its weakness on prices, Medalla said.

Analysts have said the peso remains vulnerable to depreciation given the Philippines’ current account deficit and the prospect of further U.S. Federal Reserve tightening.

Medalla was confident the central bank’s aggressive policy tightening would not prevent the economy from recovering.

Second quarter growth data, due to be released on Aug. 9, would likely show the economy expanded much faster than the first quarter’s 8.3% annual pace, he said.


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